Dell signals founder's offer could be trumped

Michael Dell's attempt to buy Dell were thrown into doubt after the board of
the struggling PC maker said that it may receive superior offers from
private equity firm Blackstone and billionaire investor Carl Icahn.

Mr Dell, who founded the PC maker when still a university student in the 1980s, last month agreed a $24bn deal with US private equity firm Silver Lake to take the company private.

The board of Dell said that initial proposals made by Blackstone and Mr Icahn could "reasonably be expected to result in superior" offers and that it will carry on negotiating with both.

Mr Dell, who founded the PC maker when still a university student in the 1980s, last month agreed a $24bn deal with US private equity firm Silver Lake to take the company private. Dell's biggest shareholders quickly accused the entrepreneur of trying to buy the company on the cheap, putting pressure on the board to find rival buyers.

Silver Lake and Mr Dell, who remains the company's largest shareholder, offered $13.65 a share in a deal that many hoped would herald a pick-up in mergers and acquisitions. Blackstone said its offer is worth at least $14.25 a share.

Dell's board added that it has not changed its current recommendation from shareholders that they accept the offer from Mr Dell and Silver Lake.

Both Blackstone and Mr Icahn have sent letters to Dell, saying they are working on formal offers.

Blackstone also named two partners it was working with, Insight Venture Partners and Francisco Partners. Insight Venture Partners is a venture capital firm based in New York, with investments in Twitter and Tumblr. Francisco Partners is a private equity firm based in San Francisco. TPG, another private equity firm that Blackstone had talked to about participating, is not involved.

The letter also said Blackstone was open to a "public stub [equity]", a vehicle which existing shareholders could roll their stakes in for shares in a new listed entity. Blackstone said there would be a cap on the size of a public stub but did not provide details.

Morgan Stanley is advising Blackstone and indicated it was highly confident it would be able to provide financing for the deal. Blackstone has faced growing pressure from its limited partners to put capital to work.

Mr Icahn, in his letter to Dell's special committee, offered to buy 58pc of shares for $15 apiece.

His proposal would leave Dell with a 42pc public float, likely leaving existing shareholders with some equity in the company. Jefferies is said to be working with Mr Icahn.

The letters are not formal offers for the company but rather expressions of interest. Dell's special committee will now have to decide whether the offers are reasonably likely to lead to a superior proposal.

Blackstone and Mr Icahn made their formal approaches on Friday night because a "go-shop" period for the company to explore other options to the agreed upon deal expired.

The break fee if Dell decides to be sold to another buyer will remain at $180m. Any new buyer to come to the table would now have to pay Mr Dell and Silver Lake $450m.

Dell's special committee is expected to acknowledge receipt of the letters on Monday.